Should I get a Car loan?

B

Bren77

Guest
I have a lump sum which I could use to buy a new Car. It took me a while to save this money so I am reluctant to spend it. Should I continue to save this money and get a car loan? or spend it and start to save again?
Also if I was to get a loan who would give me the best rate?
 
Bren77 said:
Should I continue to save this money and get a car loan? or spend it and start to save again?
Also if I was to get a loan who would give me the best rate?
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This comes down to your personal situation and what your own preference is.

By using your savings to buy the car you will probably come out in a better financial position (e.g. the % interest on the car loan will be higher than the % you recieve for your savings, giving a better financial position at the end).

This doesn't take into account the security/peace of mind of having a rainy day fund. What sort of fund you need/require/want will come down to your personal situation. Do you have any dependants? Should an emergency arrise, could you get the money from another source (loan, family etc.)? Do you have job security? etc etc.

These are questions that nobody can answer for you.

Financially, you're better off (in 99% of cases) to use the lump sum. However, not all decisions can be made on economics alone.
 
Why not go 50/50 ?
This way you can keep some of your savings in an emergency fund & car loan repayments will be halved.
 
Perplexed said:
Why not go 50/50 ?
This way you can keep some of your savings in an emergency fund & car loan repayments will be halved.
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I would agree with perplexed's suggestion.

On the other hand would you consider buying a used car say a few months or a year old with low mileage, no loan, hand over the cash and you would still have some savings and then just continue on saving as before.

Going cash in hand to a garage might give you a bit more bargaining power too.
 
If you have the cash, I would certainly not opt for a car loan. I took out a loan for a car(personal loan) in September 2004 and its due to finish September 2009. Because its flexible, its gone from approx. 7.5% to 10.58% with all these little hikes here and there. Because I am in the latter stages of it (owe now about 3,900) there is now no point in paying it off early as I wont get much of a rebate on the interest.

Upgraded my car this year to 07 model. Paid the difference in Cash, so that come September 2007, I have no loan and a car thats 2 years old. Will never ever opt for a loan for a car again, if I can help it.
 
A trusted family member gave my husband and I some "sage" advice early in our marriage and it was ' never spend your own money if you can spend the banks'. We followed that advice until we found ourselves under pressure with multiple personal loans, credit card balances, etc. We have worked hard to pay off all of our debt with the exception of a small balance on our mortgage. I would suggest buying your car with the money you have and continue your savings habit and borrow wisely for things like appreciating assets, education.
 
Why not just pay for the car in cash and set up a direct debit into a good savings account for the amount you would pay back on a car loan. You can save on interest repayments by not having to pay back a loan. You earn some interest on your savings, and you still have a rainy day fund (sell the car if need be and/or savings built up in the interm).

BB
 
Breffni Boy2 said:
Why not just pay for the car in cash and set up a direct debit into a good savings account for the amount you would pay back on a car loan. You can save on interest repayments by not having to pay back a loan. You earn some interest on your savings, and you still have a rainy day fund (sell the car if need be and/or savings built up in the interm).

BB
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Why not go for a 0% finance deal for up to 50% of the cost of your new car.

Kia are offering this, see

0% Finance on Picanto and Rio

For a limited time only, the Picanto, Rio, cee’d, pro_cee’d and cee’d_SW will offer even greater value with a 0% finance offer!

*** From 1st April 2008 0% finance customers can avail of fully comprehensive car insurance for €99! Subject to terms and conditions laid out by Kia Credit's insurance partner.***

For full details and to arrange a test drive, contact your local dealer.
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The €99 Insurance is another little sweetener, as is the 7-year/150k warranty with the Kia C'eed.

AFAIK, the deal is for up to 50% of the cost of a new model.

Some other car dealers are offering similar finance deals.

No connection with Kia, just got the 0% deal last year on the Kia C'eed 1.6 CrdI
 
I looked into some of those finance deals. The cost of the interest is built into the deal. You wont get the same discount as a cash buyer. Granted I did not look at the Kia one, looked at Peugeot, I think it was to finance half or something like that and garage more or less told me was a gimmick.
 
MandaC said:
I looked into some of those finance deals. The cost of the interest is built into the deal. You wont get the same discount as a cash buyer. Granted I did not look at the Kia one, looked at Peugeot, I think it was to finance half or something like that and garage more or less told me was a gimmick.
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Well, last year I agreed a price for a new Kia as described earlier. I actually traded in a Peugeot 307, for which I got a very decent trade-in.

I was going to finance the deal independently through Tesco Finance, at I think around 7.9%.

I was waiting so long for them to come through with the loan it was unreal. However, in the meantime Kia introduced the 0% finance deal.

I contacted the Garage, they put through the 0% Loan in one afternoon. I did not pay anything over and above what we had agreed earlier, my trade-in price was the same. The only difference was that I was getting the loan for 0% over three years.

So, it is not always true that these 0% deals have built-in interest.

I will agree however, if you are a first-time buyer, with no trade-in, you can get substantial discount.
 
Kia obviously much better to deal with than Peugeot then. The Peugeot deal was - pay half or your trade in was half of the value and the rest was financed over three years interest free.

I was getting rid of my 307 as well and did not want another one. I asked about a 207. They obviously did not want me to trade down a model and got all conflustered because the price of the trade in would have been more than half of the price of the car.

I know Opel do similar deals, and I think VW had some on Passat as well, has anyone actually priced going in as cash buyer (your own money) and then going to sign up to the 50/50 or whatever. It would be very interesting to find out.
 
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